Greek Islands Wait Out the Storm

Fiscal tumult cools the second-home market on Rhodes and other popular destinations

Like the rest of Greece, the luxury residential market on Rhodes remains in limbo.

“It’s not that anyone is going down on price points, they are waiting for the political crises to be over,” said Emmanouil Zervos, managing director of Engel & Völkers’ office in Greece.

Many luxury property owners on Rhodes and other popular Greek islands such as Mykonos and Crete are from abroad or Greek expatriates. Brokers say these owners often paid in cash and have little pressure to sell.

A luxurious, five-bedroom waterfront villa on Rhodes is on the market for $1.8 million, or €1.6 million, half the price of similar seafront properties on Mykonos, another picturesque Greek island, according to Savvaidis & Associates, a Rhodes real estate agency.

The limited stock of houses on Rhodes, which lies between the Aegean and the Levantine seas, minimizes price fluctuations, said Savvas Savvaidis, managing director of Savvaidis & Associates.

Construction on Rhodes is also restricted because a quarter of the island terrain is environmentally protected by the European Union’s Natura 2000 program.

At the start of Greece’s financial crisis, some planned and approved new construction projects on Rhodes were halted, which prevented a surplus of new homes, according to German real estate broker Engel & Völkers.

The view from a $2.5 million six-bedroom, five-bathroom home on Mykonos. View full listing.GREECE SOTHEBY’S INTERNATIONAL REALTY

The number of planning permissions for all of Greece, including the major tourist islands, has plummeted since 2008, according to the Bank of Greece.

Rhodes has weathered the country’s debt crises better than other parts of Greece, with sales dropping between 10% and 15%, Zervos said. Most properties have held their value because of the Mediterranean island’s finite supply.

Residential property investment for all of Greece fell 30% during the first three months of this year, compared with the first quarter of last year. Housing investment dipped by 51.5% in 2014, according to a report released by Athens-based Alpha Bank on June 8.

“The recovery of (the) real estate market depends strongly on the improvement in investment climate, the financing conditions and the positive economic prospects,” Alpha Bank said in its economic and financial outlook report last month.

The Greek government has also tried to attract foreign real estate buyers, granting residency visas to non-European Union buyers who spend over €250,000 on real estate in Greece. The Greek finance minister also announced in December that the capital gains tax on residential property will be pushed back until the end of 2016.

Despite the lack of sales, Zervos remains upbeat about international buyers purchasing seafront villas on Rhodes. “Right now, everyone is just waiting.”